Are Identity Theft Protection Services Worth It?

Category: Finance

You may be concerned about identity theft these days, and with good reason. If someone assumes your identity they can open new credit cards, raid your bank accounts, ruin your employment prospects, or even commit crimes for which you are blamed. With so much at stake, many people are paying $20 or more a month for identity theft protection services. But are they wasting their money? Here's the scoop...

Is Identity Theft Protection Effective?

Todd Davis, founder of identity theft protection service LifeLock, became famous for billboards that bore his Social Security Number and a dare to ID thieves: "Steal my identity" which was protected by LifeLock, of course. Well, it turns out they did, at least thirteen times! In 2010, LifeLock was ordered by the Federal Trade Commission to pay more than $12 million in fines for false and misleading adverting.

Although LifeLock has since changed their advertising and the means they use to spot identity fraud, no identity theft protection service can absolutely ensure that your identity will not be stolen! In fact, LifeLock's own adverstising carries the disclaimer that "no one can prevent all identity theft or cybercrime, and LifeLock does not monitor all transactions at all businesses."

The problem is that your identity can be vulnerable to theft from sources far outside of your control, or even sources that you don't know about. Most data breaches occur at merchants, service providers, government agencies, and other institutions to which you have given your personal information, and at still others to whom those entities have given your information without your knowledge.

Lifelock Identify Theft

Most people's identities are exposed to theft in so many different places that it is impossible to protect them all. You have to rely upon the security measures taken by those entities to protect you. Until quite recently, many business, government offices, and even one credit bureau were lax about protecting personal information from theft. (See Equifax Takes The Data Breach Cake.)

According to researchers, about 10% of Americans fall victim to identity theft each year. The Identity Theft Research Center reports that there were 1244 security breaches involving the theft of over 440 million sensitive records in 2018, the last year for which reporting was released. Major retailers, banks, government agencies, utility companies, schools, and other institutions left the doors open in often stupendously stupid ways. There is nothing that LifeLock or any other identity theft protection service can do to force third parties to protect your data. So what do you get for your subscription fee (or "insurance policy")?

See my related article Do You Know the Signs of Identity Theft? to learn the signs of possible ID theft, steps you can take to prevent it, and how to respond if it happens to you or someone you know.

What Protection is Actually Offered from Identity Theft?

LifeLock and its competitors monitor the activity of your identity online and in the economy. They monitor applications for credit cards, bank accounts, and other financial instruments made in your name. They look for "unusual activity" and alert you to it; effectively asking, "Hey, did you really do this?" If you didn't, then some thief may have, and it's time to hit the panic button.

If it appears that your identity has been stolen and is being misused, LifeLock can take care of alerting credit card companies and other institutions for you. Accounts can be locked or closed; new credit cards issued; and other measures taken to thwart thieves' use of your identity. But that won't stop a shoplifter who's caught by police from giving them your name and address as his own.

Repairing the damage done by identity theft is a years-long, painful, and expensive process. Some things that you never did may remain on your record forever. In one case, a sex offender used another man's identity, and the innocent man was told by authorities that his name can never be removed from databases of sex offenders.

LifeLock and others in the fraud protection business promise to help you repair the damage if you are a victim of identity theft. But how far they'll actually go depends on where you live, and plan you've selected. The Lifelock Terms of Service is 8,297 words of legalese, and the document entitled Evidence of Coverage: All Members Except NY and WA State Residents spells out how much they will pay out to help you, based on your membership in one of the 24 plans listed. (See the Legal Information and Resources page if you live in New York or Washington State.)

Interestingly, in the Exclusions section, you'll find that the policy does not cover losses arising from nuclear radiation, radioactive contamination, terrorism or "loss or damage resulting from or arising out of a Cyber Attack."

I don't personally know anyone who has suffered from identity theft while a LifeLock subscriber, and then tried to submit a claim for help. I do know one person who suspected that her mother (a LifeLock subscriber) had become an ID theft victim. Fortunately, it was a false alarm. But she says that LifeLock certainly did everything she would have wanted, when it came to investigating the situation, and that gave her confidence that LifeLock would have honored their guarantee if there had been a real problem.

Here's the bottom line… Identity theft protection services can provide you with some protection from identity theft, but they cannot guarantee that it will never happen. And if it does, they will provide some assistance in cleaning up the mess, but don't expect them to make it like it never happened. You'll have to decide if that's worth the $10 to $49 a month that may cost.

Do you have something to say about identity theft? Have you had an incident that was successfully resolved by an identity theft protection provider? Post your comment or question below...

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Most recent comments on "Are Identity Theft Protection Services Worth It?"

Posted by:

Peter Devries
03 Apr 2020

Make sure you don't already have this protection as part of your homeowner's insurance. We have it and the co. did just what LifeLock charges for.

Posted by:

Annette N
03 Apr 2020

I worked for the federal government - it was hacked and all the information from my extensive application forms was stolen. There were many of us.
I live in Texas and the comptroller's department at the time, put online the names and social security numbers of one million Texans. The information was online for about a year before the department noticed.
And of course there is Equifax. (I still would like to know how those 3 companies make millions selling our information and it is ok for them?)

I have 2 companies monitoring on my behalf.

I am aware that my information is available to the bad guys. So far, that has happened a couple of times to me. And none of it was from anything I did wrong.

Posted by:

03 Apr 2020

I have protection through Discover Card. My ID was stolen...Discover Card services stepped up to the plate and were very helpful. Well worth my monthly payment to the card.

Posted by:

03 Apr 2020

I recall asking Lifelock some specific questions about their coverage and they refused to answer. Instead, they referred me to a many page document in micetype. If they refuse to answer direct quesations, I'll pass on their promises. Instead, I will rely on a credit lock.

Posted by:

03 Apr 2020

I have had my credit frozen at the various agencies for almost 20 years (free). I had to unfreeze it one time to qualify for a new credit card--the process was easy. The credit card companies are good about sending alerts when they think a transaction is suspect. So far, all have been false alarms. So, I'll let the identity thiefs see that my credit is frozen and go to someone else.

Posted by:

03 Apr 2020

As a retired Federal Employee I have identify theft protection from Identity Theft Guard Solutions, LLC, doing business as ID Experts (MyIDCare). One of the actions they monitor is password compromises. The problem is they don't tell me what company breached my personal data. So they just tell me I need to go all sites where I used such and such email address and change my password. Yeah, like I'm going to go to 200+ websites and change my passwords. Without better information where my personal data was compromised this feature is useless.

Posted by:

dennis werth
03 Apr 2020

We have had my credit frozen at the various agencies for almost 20 years (free).
And we also have protection through our CapitalOne credit card (also free).
CapOne texted us and they took care of it completely.

Posted by:

Ken H
03 Apr 2020

Pretty much all my cards, debit and credit seem to do a pretty good job of monitoring "unusual activity" so I would hesitate to pay someone else to do so. Also several cards, if not all offer protection from fraudulent usage.

Posted by:

Bob Kinsler
03 Apr 2020

Yep, someone (actually I think I know who) got into one of my bank accounts and took $5K sending it to an individual I did not know. I had Lifelock but they were not the one's who alerted me about the challenge, it was my bank.

I challenge Lifelock about it and they stated they would pay for the time I spent solving the challenge, but in reality it was simple to solve.

Posted by:

04 Apr 2020

I have monitoring included with AAA membership but it always comes back with "no change". Why? Because I froze my credit 20+ years ago (now free to do). No one, including credit monitoring services, can access unless I unlock. Peace of mind and doesn't cost a thing.

Posted by:

04 Apr 2020

What I am reading from the comments above is that for those who had or have Lifelock, Lifelock does NOT live up to their expectations (to say the least). So far, it sounds to me like no one is recommending Lifelock. thanks for the insights!!

Posted by:

Daniel Wiener
05 Apr 2020

My credit card company's computers do an excellent job of detecting unusual activity in my account and immediately notifying me. Over the years there have been a small number of instances where invalid charges have been put on my card by persons unknown. Those charges have always been reversed without any difficulty. The only problem when that happens is that the credit card company insists on issuing new credit cards to my family with new numbers. Then I have to do a bunch of updating for the new numbers, which is a pain in the ass. But I understand the necessity, even if I don't like it. The important thing is that I'm not losing any money.

I've sometimes gotten a free year of Lifelock when some company having my information reports that they've had a security breach. But I've never noticed any real benefit from that Lifelock coverage. You could make an argument that it's similar to insurance: You hope you'll never need it, but if something happens where you do need it you'll regret it if you don't have it. Still, I haven't considered it worth paying to extend Lifelock's coverage when the free year ended.

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